www.fsadvice.com.au Volume 16 Issue 01 I 2021
• asking extra questions of the client to test the client’s level of understanding of the recommendations being made, and the basis for making them • ensuring as far as possible that the client feels equally free to reject the recommendation to reduce the risk that the client may be substituting trust in the adviser for rational decision-making • recommending the client undertakes education tailored to their capacity to understand • in personal advice situations: • encouraging the client to seek input from a trusted friend or family member with no conflicting interest in the outcome, and offering to meet and explain the recommendations to the family member • asking questions of the client to test their level of understanding of the recommendations being made, and the basis for making them • asking the client to explain back key elements of the advice to the adviser • presenting lower-risk options to the client in the advice to facilitate comparison and effective choice in the client’s decision-making.
FS Advice
Ethics & Governance
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To ensure that you can show you have based your advice on the client’s relevant circumstances, the following practices should be undertaken: • Show that you had concerns with the vulnerability of the client, and the steps you took to address this. This may mean refusing to provide your services to the client. • Consider if simpler or lower-risk products would be more appropriate to the level of the client’s understanding. • Do not recommend products that require client control or intervention (e.g. self-managed superannuation funds (SMSFs)). • If you are providing trading services, do not allow clients to trade using their SMSFs unless they can show a high degree of financial literacy. • Embed vulnerable client behaviours into your key risk indicators (KRIs). Your monitoring and supervision program should identify KRIs unique to your business. When the KRIs are triggered, your monitoring and supervision program should delve deeper into the representative behaviours connected with that KRI. • Document every step and action taken.
THE AUSTRALIAN JOURNAL OF FINANCIAL PLANNING•
